Hotel Contracts To Lease or Not to Lease?

Hotel managing companies date back to the early 1900s. Back then, the normal method to supply management services was through total property leases by which the operator leased the hotel from the owner. It was only between 1950 and 1960, following the global hotel expansion, that management agreements were created to provide a buffer against the operating risks associated with unknown uncertainties in foreign countries. In this article, we set out the pros and cons of leases and hotel management agreements, give an example of how they impact on hotel value and discuss the best option for different investors.

Hotel managing companies date back to the early 1900s. Back then, the normal method to supply management services was through total property leases by which the operator leased the hotel from the owner. It was only between 1950 and 1960, following the global hotel expansion, that management agreements were created to provide a buffer against the operating risks associated
with unknown uncertainties in foreign countries. In this rticle, we set out the pros and cons of leases and hotel management agreements, give an example of how they impact on hotel value and discuss the best option for different investors.

Liliana Ielacqua

Liliana Ielacqua is an Associate at HVS Consulting & Valuation in London. She joined the company in 2008 after completing her Master of Management in Hospitality degree at Cornell University’s School of Hotel Administration. Since joining HVS, Liliana has conducted feasibility studies, valuations and market researches across Europe, and written market and industry-related articles.

About HVS

HVS is a leader in global hospitality financial consulting. Hotel owners, developers, investors, lenders, management companies, and public agencies around the world rely on HVS to make informed business decisions. HVS's commitment to excellence and unrivalled hospitality intelligence is delivered by more than 300 people in over 50 offices throughout the world who specialize in a wide range of hospitality assets including hotels, restaurants, casinos, shared ownership lodging, mixed-use developments, spas, and golf courses, as well as conventions, sports, and entertainment facilities. For more information about HVS visit https://hvs.com.